Netmarble Visible at the End of the Long Tunnel... "Expectations for Q4 Profit Turnaround"

Q3 Operating Loss of 21.9 Billion KRW
Continuous Deficits Since Q4 2021
Recent New Release Performance Reflected in Q4
Liquidity Secured Through Hive Stake Sale

The seemingly endless deficit tunnel for Netmarble is beginning to show signs of an end. The company recorded an operating loss in the third quarter of this year as well, marking seven consecutive quarters of losses. However, with the recent release of new titles gaining popularity and games becoming popular in China, Netmarble is expected to exit the deficit tunnel as early as this year.

Seven Consecutive Quarters of Operating Losses

Netmarble announced on the 9th that its consolidated third-quarter revenue was 630.6 billion KRW, down 9.2% compared to the same period last year. The operating loss for the third quarter was 21.9 billion KRW, and the net loss was 28.4 billion KRW. Operating profit has recorded losses for seven consecutive quarters since the fourth quarter of 2021. However, operating losses decreased by 15.3 billion KRW and net losses decreased by 15.7 billion KRW compared to the previous quarter.

Operating expenses were 652.5 billion KRW, down 10.9% compared to the same period last year. Labor costs decreased by 11% year-on-year to 180.6 billion KRW due to a reduction in workforce. Commission fees decreased by 14.1% year-on-year to 239.1 billion KRW, reflecting increased revenue from proprietary IP (intellectual property) games. Marketing expenses slightly increased to 145.8 billion KRW due to the launch of new titles in the third quarter compared to last year.

Overseas sales in the third quarter were 520.6 billion KRW, with the overseas sales ratio decreasing by 3 percentage points (P) from the previous quarter to 83%. The sales ratio by region was diversified, with North America at 47%, Korea at 17%, Europe at 12%, Southeast Asia at 10%, Japan at 6%, and others at 8%.

Netmarble 'Seven Knights Growth'

"Expecting to Turn Profitable in Q4"

Netmarble is confident about turning profitable within the year. This is because the games released in the third quarter, 'Tower of God: New World' and 'Seven Knights Raising,' are steadily gaining popularity in the domestic market. Although marketing expenses for these games were reflected in the third-quarter results, only the game performance will be fully reflected in the fourth quarter, which is expected to drive performance improvement.

The popularity of games launched in the Chinese market is also a positive sign for performance improvement. Netmarble released 'Stone Age: Awakening' in China on the 26th of last month. Within two weeks of release, it ranked 8th in revenue on the Chinese Apple App Store, showing steady results. This game is an MMORPG developed by Tencent using development resources provided by Netmarble, which receives royalties from licensing.

Recently improving its financial structure by selling Hive shares is also expected to help turn profitable. On the 6th, Netmarble sold 6% of its 18.1% stake in Hive. This amounted to about 2.5 million shares, with a disposal amount of approximately 568.75 billion KRW.

In 2021, Netmarble raised about 1.8 trillion KRW through foreign currency loans to acquire the U.S. social casino company SpinX. Due to the strength of foreign currencies, the interest burden in Korean won increased, negatively impacting net profit. This liquidity secured is expected to significantly reduce interest expenses.

Netmarble is also accelerating new game development. Plans include the global release of 'Paragon: The Overprime' in the first half of next year, as well as the release of 'Arthdal Chronicles: The Three Powers' and 'Solo Leveling: ARISE.' At 'G-Star 2023,' opening on the 16th, three highly anticipated titles?'The Seven Deadly Sins: Origin,' 'RF Online Next,' and 'Demis Reborn'?will be unveiled.

Netmarble CEO Kwon Young-sik said, "Since the two new titles, 'Seven Knights Raising' and 'Tower of God: New World,' have recorded meaningful results, we have expectations for turning profitable in the fourth quarter," adding, "With the upcoming release of six new titles including 'Arthdal Chronicles: The Three Powers' and 'Solo Leveling: ARISE,' we will achieve even clearer performance improvements."

This content was produced with the assistance of AI translation services.